Situation I On January 1, 2022, Concord Outfitters signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of R$4,960,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2022, to finance the construction cost, Concord borrowed R$4,960,000 payable in 10 annual installments of R$496,000, plus interest at the rate of 10%. During 2022, Concord made deposit and progress payments totaling R$1,860,000 under the contract. The excess borrowed funds were invested in short-term securities, from which Concord realized investment income of R$62,000. What amount should Concord report as capitalized borrowing cost at December 31, 2022? Capitalized borrowing cost R$

Situation I On January 1, 2022, Concord Outfitters signed a fixed-price contract to have Builder Associates construct a major plant facility at a cost of R$4,960,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2022, to finance the construction cost, Concord borrowed R$4,960,000 payable in 10 annual installments of R$496,000, plus interest at the rate of 10%. During 2022, Concord made deposit and progress payments totaling R$1,860,000 under the contract. The excess borrowed funds were invested in short-term securities, from which Concord realized investment income of R$62,000. What amount should Concord report as capitalized borrowing cost at December 31, 2022? Capitalized borrowing cost R$

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Contract Costing

Contract costing is about tracing particular costs related to a particular contract entered into with the customer. It is one of the forms of job order costing. It is useful in long-term contracts at the most. It is seen that substantial time is required for the completion of the contract which takes different accounting periods. Thus, it is very much helpful for recognizing the costs associated with it and accounting in their specific accounting periods.

Question

Situation I
On January 1, 2022, Concord Outfitters signed a fixed-price contract to have Builder Associates construct a major plant facility at
a cost of R$4,960,000. It was estimated that it would take 3 years to complete the project. Also on January 1, 2022, to finance the
construction cost. Concord borrowed R$4,960,000 payable in 10 annual installments of R$496,000, plus interest at the rate
of 10%. During 2022, Concord made deposit and progress payments totaling R$1,860,000 under the contract. The excess
borrowed funds were invested in short-term securities, from which Concord realized investment income of R$62,000.
What amount should Concord report as capitalized borrowing cost at December 31, 2022?
Capitalized borrowing cost R$

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